According to the experts, factoring is “the factoring operation which consists of a transfer of trade receivables from their holder to a factor responsible for making the recovery”. The factoring company may prepay all or part of the amount of the receivables transferred.

In practice, factoring involves three protagonists:

The company that holds claims on its own clientele, and transfers them to the factoring company.The factoring company (or factor) that purchases the transferred receivables and provides its client with a number of services (financing, default risk prevention, customer account management). With the factoring accounts receivable this happens to be important.

The buyer (the client of the client)

Principle of factoring

All rights reserved FT Media

Factoring, the essential

Why opt for factoring?

Guarantee against unpaid bills

Factoring companies offer companies to protect them in the event of customer failures.When a customer turns out to be insolvent, the company recovers most of the debt (between 80 and 90% of the amount), thanks to the credit guarantee subscribed with the factor.

Customer Account Management

The factor manages the customer accounts that you entrust to it: recovery, collection of invoices, and settlement of payments, account maintenance and legal action.Better, he puts them under surveillance via a watch of their economic and financial health.

Funding

The factor redeems your bills. You cash all or part of the receivables due within 24 or 48 hours by bank transfer. You no longer experience a cash gap.

The factor accompanies the development of the client and your company.

The funding ceiling is not limited. An annual minimum amount to be recovered is required.

Factoring and corporate image

The use of a factor does not alter the relations that the company usually has with its environment:

With his clients

Contrary to popular belief, the image of your company does not suffer from the use of factoring, which is increasingly required as a tool for a sound management of cash. In case of doubt, you can hide from your customers your decision to work with a factoring company via a contract guaranteeing confidentiality.

With his bank

A company uses the services of a factor to benefit from a cash advance or even discharge administrative tasks related to the management of the receivables. In any case, this remedy cannot disrupt the relationship that it usually has with its bank, nor prevent it from resorting to traditional banking products.It can, for example, combine the provision of a factor and a discount line negotiated with its bank.

Banks with subsidiaries, which are factoring companies, often refer the companies themselves to this financing service.

With the factor

The factor finances part of the customer’s item, takes care of the recovery of the receivables but do not interfere in the commercial relationship that the company has with its client. He is content to provide information collected through the economic and financial watch he leads. These data can obviously influence the commercial policy, but the company remains the sole judge of the use made of it.